Correlation Between UFP Technologies and Northwest Pipe

Can any of the company-specific risk be diversified away by investing in both UFP Technologies and Northwest Pipe at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining UFP Technologies and Northwest Pipe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UFP Technologies and Northwest Pipe, you can compare the effects of market volatilities on UFP Technologies and Northwest Pipe and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in UFP Technologies with a short position of Northwest Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of UFP Technologies and Northwest Pipe.

Diversification Opportunities for UFP Technologies and Northwest Pipe

0.66

Correlation Coefficient

UFP Technologies  Northwest Pipe

Poor diversification

The 3 months correlation between UFP and Northwest is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding UFP Technologies and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe and UFP Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on UFP Technologies are associated (or correlated) with Northwest Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Pipe has no effect on the direction of UFP Technologies i.e., UFP Technologies and Northwest Pipe go up and down completely randomly.

Pair Corralation between UFP Technologies and Northwest Pipe

Given the investment horizon of 90 days UFP Technologies is expected to under-perform the Northwest Pipe. In addition to that, UFP Technologies is 1.35 times more volatile than Northwest Pipe. It trades about -0.08 of its total potential returns per unit of risk. Northwest Pipe is currently generating about -0.08 per unit of volatility. If you would invest  4,983  in Northwest Pipe on December 26, 2024 and sell it today you would lose (631.00) from holding Northwest Pipe or give up 12.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

UFP Technologies  vs.  Northwest Pipe

UFP Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days UFP Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Northwest Pipe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northwest Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with UFP Technologies and Northwest Pipe

The main advantage of trading using opposite UFP Technologies and Northwest Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UFP Technologies position performs unexpectedly, Northwest Pipe can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Northwest Pipe will offset losses from the drop in Northwest Pipe's long position.

The idea behind UFP Technologies and Northwest Pipe pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.